Resource Commodities

Leading Edge Materials (TSX-V: LEM) CEO Blair Way Recaps the Company’s Many Milestones Hit in 2017

February 23, 2018

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Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me today is President and CEO of Leading Edge Materials (TSX-V: LEM)(OTC: LEMIF), Mr. Blair Way. Blair, how are you?

Blair Way: I'm great, Gerardo. How are you doing?

Gerardo Del Real: I'm well, I'm well. Thank you for coming on. We haven't had the opportunity to catch up on air for, I believe, a couple of months now. It's coming up on two and a half months, and you've had a lot of progress. Obviously, it was a very successful 2017, so I want to touch on some of the milestones there.

There's a lot going on behind the scenes, specifically as it relates to the European Union and the electrification of everything. It seems like the EU is becoming a whole lot more aggressive about establishing a critical metals chain outside of China. I'd love to touch on all of that. But first off, can we talk about 2017 and some of the key milestones for you?

Blair Way: Absolutely. 2017 has been a great year. It's a busy year. As you said, we haven't caught up for over a couple of months simply because there's been an awful lot going on. Certainly one of those has been the new listing that we set up on Nasdaq First North in Sweden. It's been a pile of work to get that process completed. We started trading in the third week in January, and we've certainly seen some interesting developments as a result of that. We're picking up quite a significant Swedish component who are very supportive of the space and there's a very clear understanding of all that's going on in the European Union with regards to clean energy, electric mobility, and the like. That's been a big milestone.

We've also had the Bergby drill program. We haven't touched on the most recent drill results which came out just after Christmas, which is not a great time for things to come out, but it comes out when it comes out with the labs and the like. We're pretty happy with those results. We've seen a few teasers of tantalum, some decent intersects of that, and then lithium oxide, some good numbers, up to 2.7% on short intervals and 1 to 1.5% on the larger intervals. We still have some work to do with that and have to figure out the next steps in order to grow the scale of that discovery, but we're very happy with what we've seen to date. And certainly, in the scale of what we see in the European Union as far as potential lithium deposits, Bergby is something we're very, very proud of at this stage.

And then, of course, we've had the Norra Karr, our rare earth deposit, which has been sort of idling in the background to some degree. We've been working on some of our regulatory compliance requirements, such as a mining lease and the like, and that's been plowing forward. We did a recent update a couple days ago, just talking about the journey that we've been on with the Mining Inspectorate, and we have our mining lease application continuing. It's been a long haul as we've processed through that, but the good news is it's still well and truly secured for us, and we've got our PFS in place. We're now taking a lot of the work from the PFS and looking at ways to improve both waste utilization minimization in order to improve the environmental footprint and the economics of the property. We've got quite a bit of work planned in 2018 and beyond for that.

And then, of course, the real big thing that has been evolving in the latter part 2017, I'm not sure if any of the listeners have heard about all the news with the EU Battery Alliance. That's an initiative that is just taking off. Essentially, they're targeting, or identified a $250 billion market by 2025, and they want to make sure that the European Union is part of that.

One of the things we've seen recently, just in the new year, is Northvolt, which is a company that we're working with that is planning to build a battery facility in Sweden. European Investment Bank, through this alliance, has financed just over 50 million Euro for them to build a demo site, and their objective is to build the greenest batteries. Of course, we hope to be a part of that with our graphite supply and quite possibly some of the other commodities that we're working on.

And then, of course, even beyond that, in the background we are still seeking out any of the specialty materials, be it lithium or even cobalt that we can find in Europe that we believe would be a possible source for these up and rising battery cell manufacturers. So, an awful lot going on. I've probably just worn your ears out telling you the history of the past 2017, but there has been a lot going on, and these things are all going to carry on into 2018, and there's more to happen.

Gerardo Del Real: Well, I actually think that's the perfect introduction to 2018, right? I believe that although the lithium asset is earlier stage, it's not insignificant. You've now tested it, I believe, with a total of 33 holes and about 1,500 meters of strike length to a depth of about 130 meters. I'm flying off the top of my head here so correct me if I'm wrong, Blair. But you encountered mineralization in most of those holes if I'm not mistaken. Is that correct?

Blair Way: Yeah, that's correct. As I said, we're happy with the results. We've done the 33 odd holes and yeah, off the top of my head, I'm just confirming our meterages. Yeah, just 1,525 meters, drilling 33 holes, and maximum depth of only 131 meters. So it's a shallow discovery. And there was only five of those holes that didn't have any mineralization. That's a pretty good outcome for such an early drill program.

There's lots more to do on Bergby. It's still early stage. But as I said, as far as lithium deposits in Europe, none of them to appear to be a mega-deposit type thing that we see elsewhere in the world, so we have to be pragmatic about what's suitable. But the fact that it's in Europe, and it's also in a country that may well have a well-established battery cell manufacturing, there's opportunities there that we will continue to pursue in 2018 and beyond for Bergby and, quite possibly, if there's other satellite discoveries that we can find that might complement Bergby, to grow that scale as well.

Gerardo Del Real: Let's talk about the rare earth assets, Blair. I believe that the rare earth assets are going to become an increasingly important part of the Leading Edge story. There was some research that was published, I believe, by the Swedish government a couple of months ago that really, really supported, in very glowing terms frankly, the rare earth assets that you have in your portfolio.

For people that aren't familiar with that aspect of the portfolio, because graphite is the focus and the flagship, can you describe the two assets and just the robust nature? Because again, I think they're going to become an important part of the story in 2018, especially as the European Commission looks to really get a stronghold on this critical metals supply chain and establish that in Europe. Can you talk to that a bit?

Blair Way: Absolutely. Norra Karr is a bit of a sleeping giant, and as I’ve mentioned the many times we've spoken in the past, it's been somewhat idling in the background just because the world went through the bubble of rare earth, and everyone got excited and then everyone got unexcited. We continue to be excited about the property simply because it is one of the world's principal heavy rare earth resources, and the opportunity for that in the future, especially for the European Union and the fact that it is really the only significant heavy rare earth deposit in the European Union, this is a great potential for us as a company.

Now, we have put out a PFS. That's a pretty substantial document, but as with any PFS, there's always room for improvement and economizing, shall we say, to both make sure the scale is fit for purpose, make sure our environmental footprint and economics are as robust as possible. Over the coming 2018 and the year 2019, we're continuing to do work on that to better define how to make the Norra Karr project the most significant and beneficial project for the European Union and for customers.

Part of that will, obviously, be seeking out the right types of customers. That's one thing for all of our commodities that we carry, unlike say gold or copper or zinc, finding a customer is the last thing you're worried about. Really, with these sort of specialty materials, we do have to make sure we've got customers that are genuinely interested and even financially contributing to be part of the process to move the projects forward.

But Norra Karr, as I said, certainly is a sleeping giant. We've got a number of initiatives underway where we can demonstrate how Norra Karr has great potential for supplying the European Union with these specialty materials. And with these battery initiatives, of course, that's driven through the electric mobility and even stationary energy storage, all the electric motors that have a battery, electric motors, and the magnets that are required for green windmill power generation and the like.

The connection between Norra Karr, rare earths, and magnets and the like is definitely there. It ties in with the expectations of these battery and European Union initiatives. We just are continuing to work with potential customers to make sure we get that connection, and then with that connection that enable us to move the project forward more aggressively.

Gerardo Del Real: That actually provides a perfect segue into my next question. Northvolt is, obviously, the elephant in the room right now. The European Investment Bank recently approved a loan request from Northvolt where they went ahead and authorized a loan of, I believe, 52.5 million euros. Can we speak a bit to the Northvolt European battery project and why that's important for Leading Edge?

Blair Way: Well, as you say, it's the elephant in the room. Northvolt has been working diligently as a private company but with some significant commercial industrial partners. This has led to them being in a position now where they have this European Investment Bank loan of, as you mentioned, just over 50 million euros.

Northvolt's objective is to build the greenest battery in the world. They're preparing, and this funding will be used to build a demo site in Sweden. Certainly, we have been working with Northvolt as part of their supply chain. It's been on a relatively confidential basis, but we're hopeful as things move on there'll be more and more that we can talk about as we see Northvolt grow and evolve as a company as well.

Northvolt certainly is a significant participant in this green energy, clean energy for the European Union, and Leading Edge participation as part of the supply chain with Northvolt is, in our opinion, quite significant. We hope to have more to discuss and talk about throughout 2018, and even in 2019 as this demo site comes online.

Gerardo Del Real: I'm going to quote the CEO of Northvolt, Peter Carlsson, who recently said, "With the support from the European Investment Bank and the European Union, we are now one step closer to establishing a competitive European battery manufacturing value chain." That's from the CEO of Northvolt, Peter Carlsson. Can you tell people who are not familiar with Peter what his background is?

Blair Way: Well, his claim to fame is being part of the supply chain, a senior executive with the Tesla family of electric vehicles in the U.S. He was with them, I believe, for four or five years, so he's got a great deal of experience with regards to supply chain and the whole electrification and battery manufacturing. He was part of the gigaplant that Tesla built, so he has a significant background in the space.

He and a couple other ex-Tesla executives formed Northvolt with the support of some fairly significant heavy hitters in Swedish industry. We're just seeing them go from strength to strength and this, this 50 odd million Euro is a significant chunk of change to be put in place in order for them to demonstrate and achieve their objective of building the greenest battery, really, in the world.

Gerardo Del Real: Well, I think 2018 is a critical year for Leading Edge. I'm hopeful that a lot of the behind the scenes work that you've done, Blair, you and the team, is able to be articulated and vocalized in 2018. I'm looking forward to that. Where can people catch up with you? Will you be at PDAC?

Blair Way: Yeah, we are at PDAC. If people want to come down and have a chat, we'll have a team down there with us, booth 2939. It's always great to meet investors face to face. People who got questions or things they want to talk about, always happy to do so. As always, through our website, if people are curious, or concerned, or have issues, I do get quite a few emails, and I try to answer most of them myself. It's part of the job to interact and communicate with our investors directly. I can't tell any secrets or anything. Obviously, it's what we're allowed to disclose and what has been disclosed, but certainly I can give more texture around things. I'm always happy to chat, even in person at various conferences or through our info email on our website. But yeah, it's always great to catch up with people.

Gerardo Del Real: Fantastic. Blair, now that the new year is here and the holiday season is behind us and we have PDAC coming up, hopefully I can have you back on soon for new updates.

Blair Way: Yeah, for sure. I'm hopeful, maybe even in a few weeks' time. As I said, I expect to see things rolling out, and around PDAC there's always a little bit of information flow that helps us as well. So yeah, I look forward to having a chat. Hopefully 2018, some of our partners have enabled us to have a little bit looser lips on some of the things that we like to talk about.